Aussie Debt Solutions

Unsecured loan defaults

There is a new organisation called wayforward.org formed to assist unsecured bank borrowers manage bank loans with which they are having trouble. It’s CEO is a former big 4 bank executive and half its Board of Directors comprises big 4 bankers. It acknowledges that it might be paid by the banks or financial institutions it helps, 20% of what it helps the banks collect from borrowers. So you know which side it is on!

It sounds like the banks’ own commission-based debt collector. For many people in distress with loans it will help them make all the payments. That might mean extending the loan term and that will be a good idea. If interest has to be paid during that period it will still be a good Idea. It is a worthwhile initiative but it probably will not address wrongs by the bank, anymore than APRA, AFCA or ASIC do.

Changing banks

Banking has become much more competitive now. For the 20+ years of bank deregulation many bank customers have remained with their old bank and been given less than generous treatment. Many have been penalised for their loyalty. Today it is much easier to change banks with all permanent payments moved too, along with security documents. GBAC is introducing a new service in 2022 to enable borrowers to obtain better loans from banks. It will also assist borrowers to better manage their loans to avoid receivership or foreclosure problems, which are a lot more common than people think when applying for a loan.

Beating bank abuse

Bank deregulation in the 1980’s led to bank customer abuse of mortgage secured borrowers. For that reason GBAC gradually changed from a Chartered Accountancy firm offering accounting, tax, estate planning and audit services throughout Australia, to sorting out bank loan issues for mortgaged borrowers through mediation and negotiation. Originating in the Latin, the word “Mortgage” literally means “Death Pledge”. For many troubled borrowers it can feel very much like that.

Since de-regulation, GBAC has offered a comprehensive service to farm and business borrowers in every state and territory of Australia. The blame when loan problems arise is often directed towards the borrowers, blamed for not doing what they promised or taking on more debt than they could handle. However, GBAC has found that very often the fault sits squarely with the bankers. When that happens the bankers can often be persuaded to write off large amounts of debt, frequently including accumulated interest. They write off a lot more than 20%. GBAC’s best write off was 100% of a $650,000 business debt. It’s largest write off was $5 million written off a farm debt.

Strategic investigation, negotiation and persuasion

Not only is GBAC the seat of very solid investigative accounting, but it is skilled in research and has a very powerful secret weapon to persuade banks to be fair to their customers. Some banks are more inclined to be fair than others.

Never let the bank get the better of you. Not from the moment you read its Letter of Offer. There are rogues in banking as in any other field of endeavour. They rob Australians of their health, their farms, their businesses and their homes, sometimes their families and even their lives. They don’t earn more in a month than the Prime Minister does in a year, for nothing. But the borrower who remains in charge at all times and heeds the GBAC formula will mostly come out very well. GBAC does not receive any payment of any kind from the bank. It aims to earn its clients a profit of around 10 times what it charges them.

You could help stop corruption, neglect and incompetence spoiling our Australian dream – just by getting a tiny bit involved!

GBAC has helped borrowers get a fair go from banks ever since politicians decided to stop government from doing so. Major banks have since then ruthlessly bled borrowers to earn gigantic profits, pay multi-million dollar salaries and distribute big dividends to major shareholders.

But business and farm profitability does not depend on lenders alone. It depends on a fair and honest business, political and economic environment. Sadly that seems somewhat lacking in Australia at present.

Would you please consider sparing 5 minutes a month (an hour a year) out of your busy life to share your views on issues that interest you?

How much corruption, neglect and incompetence in government can you tolerate before it seriously damages all of our lives & those of children,  grandchildren as well as our farms and businesses? We are all busy, but our democracy is driven by those who get involved, for those who get involved and those for whom they care.

At present, due to voter neglect, Australia is driven by the rich and powerful, the media barons, politicians, political parties and big political donors, all primarily for themselves. Most people, quite logically, think of themselves first so it does not mean that is bad, but it is certainly selfish and it neglects the majority of Australians.

Thousands Australians already work, free of party politics, with FairGO and Voters Network or have used Votergrams to help politely and persistently guide our parliaments along an honest and fair path. But there are 16 million voters in Australia, so we need more  people than that to share their views on what should be done.

Please join Voters Network, voters.com.au/join.php now and do your bit for Australia. It is free and funded by member donations and fees for services, no government money! To influence government policy more you can reach each Member of Parliament by inexpensive Votergrams or brief FairGO to help your campaign.

Your  help in driving Australia wisely into the future will most likely enable your borrowings to produce greater returns for you and others.

Once you understand that you can move forward. The only benefit of being loyal to your bank today is that it offers you a worse deal than it offers new customers.

Banks make billions while borrowers sweat it out to repay their debts.

It does not have to be that way.

Get the banks competing for your business. GBAC devised the way to do that as soon as banks were deregulated by compliant politicians in 1987. Since deregulation banks have bled their customers dry with excessive charges.

Get the loan contract that suits you, not just the bank.

Your loan may be your largest risk in life, because it could lose you most of what you own.

Get a free “Debt Check” to ensure that your loan is still the best one for you.

GBAC specialises in helping family businesses and farms with their loans.

Receive advice from a consultant who has actually run profitable farms and businesses as well as advising them Australia-wide as a Chartered Accountant, CPA, ACIS, FID.

Banks have been forced by government to give borrowers a lot of lee-way with loans during the covid 19 pandemic. Soon they will look to get those loans back on track. But there is a hidden danger for borrowers.

Loan contract terms will have been broken even though the bank has allowed it. Experience shows that banks often use that later as an excuse to appoint a receiver or foreclose.

By re-financing you can start the loan all over again, afresh with no defaults to your name and you can extend the loan terms to let your business or farm recover slowly.

At GBAC we help clients find the best and most appropriate loans for them. We do not accept brokerage from the bank as bank mortgage brokers do. We work 100% for the borrower.

Once you have a couple of new banks offering you suitable loans as re-finance, then you can put that proposition to your existing bank and see if they will refinance you on the same terms. They probably will, but only because there is competition for your loan business from other banks. That is how they make their billions. Then you can choose who you go with.

Give us a call if you want a hand. 0428 417 496

How good are our Federal MPs. No sooner had FairGO alerted each of them by Votergram to the “Mortgage Lenders Insurance” big bank scam, than they got busy and solved it with a government guarantee home loans for borrowers.

We are lucky to have such responsive and helpful MPs. Don’t be misled by negative media.

GBAC Advisory learned of this Big Bank scam and successfully defeated one Big Bank to help a young Queensland couple. Then FairGO took it up with MPs.

Not all banks are equal. Let us help you shop around for the best loan with an inexpensive Loanagram.

This week term deposit rates were a good example

For 12 months:

Rabobank offered .75%

Commonwealth offered .55%

Nab offered .5%

Westpac offered .3%

emailgreg@fairgo.org for help with your term deposits, business and farm loans or debt problems in general.

Wise family farm and business borrowers will use this time while banks are not chasing up arrears on loans, to extend their loan period with the right to pay back early if able to.

If they are lucky enough to be showing good profits due to high prices then it may be the time to send the bank some financial statements.

We could be in the lull before the storm. It is easier to obtain better treatment then than if you seek it in the eye of the storm as people often do. Forward planning pays. Remember that interest is not deferred when repayments are.

Should you need a hand do not hesitate to call us on 0428 417 496. GBAC Advisory has been helping people manage their bank loans since de-regulation in 1987.

Being a retired Chartered Accountant and CPA, having run my own sheep and cattle properties, hire companies and real estate developments I know how good it is to have your loans always under your own control.

Never put up with bank abuse and remember that in terms of loan consultants you generally get what you pay for.

We have some very special tools for making banks play ball.

The very best way to turn farm debt into profit is by having some of it written off by the bank.

It was one of the NSW Rural Financial Counsellors who was referring work to me some 30 years ago who first pointed me in the right direction. Then with a bit of digging I discovered what should have been obvious.

We all know that the fruit shop throws out bad fruit and the bakery throws out stale bread. What I had never thought about was what moneylenders did with loans that go bad. I wondered what would make a loan go bad. Default by the borrower was one way. Default by the lender might be another.

Of course banks are making billions today, so losses on 5% of their loans  that “go bad” are well and truly covered by the massive profits they earn on  the other 95%. When I pressed bankers really hard on business, farm, home and credit card debt, I found that they would write some of the debt if they had good reason to. My first write-offs related to Swiss franc loans based on totally negligent bank advice. They grew with exchange rate variations. After months of work one bank made a very large concession to settle the debt. Then I was approached by a couple with a $20,000 credit card debt they could not repay. After some persuasion the card company kindly wrote off $11,000.

Debt converted to profit is usually debt that should not be there at all. It is a question of identifying it and convincing the bank that it will cost it a lot more than it is worth to recover it. For example, if  the amount of debt that has been manufactured by the lender is $500,000 but the lender will likely lose $1m in the process of trying to collect it, the bank would be better off doing the right thing and writing it off.

Back in the bush my firm, GBAC worked for some months on a large farm loan and found that in the end the bank was happy to write off 20% of it so the borrowers could refinance elsewhere. The farmers made more money that way than they had in the previous five years of farming.

We have had 50% written of for a grain grower and 100% for a city based business. Of course it is not simple. Moneylenders will fight with their last breath to squeeze another dollar out of their borrowers. Big banks are a lot better than fringe lenders who might break your legs as part of the recovery process. Our Votergram campaigns in Parliament helped bring on the Royal Commission. But big banks led by directors with no morals at all have just been given penalties, whereas anyone else would be put in gaol for the amounts they have stolen.

However, our firm has now had 40 years of persuading banks to write off debt. Quite a few lawyers and many shysters have followed us into the “bank negotiator” field. Some leave the borrowers worse off in the long run. That particularly applies to farm loans because city based lawyers or brokers who get into it, frequently have no idea of why the farm debts were in trouble in the first place. Often they just consolidate loans into one place which can be the very worst option for a borrower who is battling.

Some banks do fight on, determined to keep every precious dollar they can, but persistence pays. Some bank CEOs, on the other hand, are really good and when confronted with dishonest practices within their bank move quickly to write of the amounts dishonestly obtained.

Fake Authority

If you have been badly treated by your bank, particularly in connection with a farm loan (or a business loan for that matter) you may have tried to obtain help from the Australian Financial Complaints Authority, ASIC or the ACCC.

You may also have not received any constructive help at all. ASIC and ACCC are not likely to obtain any cash benefits for you to compensate for what the bank has done to you. They both have a multitude of tasks and quite limited resources.

The Australian Financial Complaints Authority (AFCA) sounds as though it is a government body, but it is not that at all. It is in fact a body owned by the finance industry itself, for the benefit of the finance industry. It is self regulation. It acts effectively against minor players doing minor wrongs, but when it comes to banks robbing borrowers of hundreds of thousands of dollars it is hopeless. It sides with the bank and does not have the authority to rectify major bank fraud or compensate borrowers for very significant losses.

Bank Fraud

The most common fraud by banks on customers is in contravention of the Banking Act and if the debt is only a few million dollars, also in contravention of the National Consumer Credit Protection Act. This fraud is often described as the “Debt Trap” or a “Ponzi Loan”, meaning a loan that can only be serviced by taking out more loans to cover the interest and charges. It involves offering to customers loans that can be seen by a skilled banker to be unaffordable by those customers. These affect the majority of borrowers who are not accountants or economists. They are skilled in their own field like farming, grazing, breeding, horticulture or some other form of agribusiness but not skilled in finance or debt management.

If you find that you have run into trouble paying your loan on time for an extended period, the chances are that you have been tricked into the Debt Trap and given a loan that is unsuitable for you. The Banking Royal Commission has revealed how seemingly respectable banks have robbed customers blind.

It is relatively easy when applying for a loan to obtain one that is completely suitable for you, but that will probably not deliver as much profit to the bank, so the banker will not suggest it to you.

Weather

I am a farmer and know how farmers think. Farmers are optimists. They have to be, in a business that is so weather-dependent. That means that when asked to forecast their future yields they err on the high side. A qualified accountant like myself (retired FCA, CPA) knows that forecasts are like dreams and budgets can be plucked out of the air with no realistic foundation at all. A farmer will always estimate crop yield at the best rate likely to be achieved and yet the result is like spinning a chocolate wheel depending on if and when it rains. Sheep and cattle breeders can fairly accurately estimate their lambing or calving rates but they cannot accurately predict prices, floods or droughts.

It is these unknowns that allow their forecasts to often suggest that they can carry more debt that they can in reality. Banks who have been lending to farmers for over 100 years in Australia have a mountain of statistics on farm profitability in every region of the country for every type of farm. They can easily see what level of debt is affordable and what is not. The more reputable banks have become more careful since the government introduced “responsible lending laws”, but the government is looking to relax those.

A common trap used by banks is to have farmers produce cash flow forecasts on which their ability to service the loan will be assessed. However, cash flow can be manipulated by sale, for instance of livestock. Simply put, a beef cattle producer can increase cash flow in a three year period easily by selling more heifers and cows. However the future calvings will fall correspondingly and so will both cash flow and profits in the next few years. Wise farmers will do their own profit forecasts as well as the cash flows. Breeders are assets and it does not help loan servicing to sell off assets that produce the profits. The cash flow error leads many farmers to convert annual farm profits into debt for themselves and profit for the bank,  because when profits fall they have to borrow more money to keep on operating.

Challenging the bank

So the 9th hint in turning farm debt into farm profit is to consult a firm like GBAC Advisory to do battle with the bank for you and knock your loan into shape.

It is not really a job for the rural financial counsellors except in the sense that they can be a great deal of assistance in helping you to do your budgets and understand your financial statements. GBAC has done a lot of work in conjunction with Rural Financial Counsellors. However they have two limitations when large non-performing loans are concerned.

Firstly they are not generally qualified accountants and although they will know how to read and interpret the statements prepared by your tax consultant they will not know the many accounting pitfalls that can turn otherwise correct financial statements into a false picture of operations.

The second limitation Rural Financial Counsellors have is that of necessity they develop a quite close relationship with the banking executives in town and would not want to offend them in any way.

We, on the other hand, have seen far too many families suffer and lose or face losing, their homes and farms because of dishonest banking practices. We have  no qualms whatsoever about tackling the bank and raising inappropriate or unfair practices with the bank directors or Members of Parliament.

Regulation

Before de-regulation by the Federal Government in the1980’s, bankers made modest profits by serving the needs of their customers and guiding them on their finances. In particular they ensured that a customer would not be offered a loan that they could not afford.

After deregulation, bankers discovered that if they offered more risky loans most borrowers would put in a supreme effort to service them and in most cases they would succeed by working harder and earning more money or by drastically cutting their expenditure pattern.

But in farming that is often not possible. Extravagant living is unusual in the bush a good way from town. Output is largely determined by the size of the farm and what it will carry.  The unseen issue by a bank risk manager is the weather. Flood fire and drought can destroy a year’s profit without even trying. A good season can, as Dorothea McKellar would can “ can pay us back threefold.” For the farm without debt that works okay, but for the one with a bank loan the bad season means penalty interest rates and extra charges just at the time when loan repayments cannot be made at all and the overdraft has blown out to beyond its maximum. That increases the debt in a cumulative way that cannot mostly be undone by the next good season which might be five year away.

Act Early

What works best is the farm borrower who engages us for a very brief and inexpensive annual review of their loans and profitability right from day one.  In fact many use us to negotiate a more suitable loan in the first place. The old saying “a stitch in time saves nine” is never more applicable that in loan management. A debt problem can be easily nipped in the bud in the year that it arises. Ten years later when the bank has appointed a receiver because the debt has multiplied beyond rational belief, it can often only be solved by a no-holds- barred, knock-‘em -down-drag-‘em -out battle with the bank.  It is not just stitches that are saved then, but dollars, farms, happiness and mental health.

For those who do not see the problem coming and are victims of bad seasons or government policies, we can offer good options.

More about that in Hint No 10

If you are interested in turning farm debt into farm profit and how best to do it, check out this 8th hint on the GBAC site